Ideas for a progressive future

The Housing crisis

Housing is a continuing crisis in Britain and is no nearer being solved

This piece is taken from a presentation by Trevor Cherrett to the last Salisbury Compass meeting which took place on 22 July 2017.

Housing is a continuing crisis in the UK the problem being that many people cannot afford the market. This leads for instance to people having to travel great distances to work because they cannot afford to live nearer; homelessness and to many having to sleep on friend’s sofas. One way or another, a sizeable number of people suffer stress arising from the housing crisis. Housing is a key component in an individual’s wellbeing.

Causes

There are three principal reasons for this:

a straightforward shortage of houses

regional issues and in particular the enormous disparity in prices around the country

house builders and developers are alleged to ‘ration’ the supply of housing for commercial reasons

Another issue is the question of land, who owns it and what happens when planning permission is given to build on it. A piece of agricultural land is worth a matter of thousands an acre: grant planning permission and this value increases a thousand fold to be worth millions an acre. This represents a massive windfall gain to lucky landowners but also, crucially, adds an enormous premium to the cost of a house. This issue gets little coverage in the discussions about housing. Attempts to derive gain to society as a whole have come to nought. Since the majority of land is owned by inheritance and is held by the landed elite some of whom inhabit the House of Lords, little is likely to change. The fact remains that the poorest in society suffer housing stress in part to enable landowners to reap enormous windfall gains.

Housing White Paper

The Government has recently published a White Paper on housing which admits that the current system is not working well but the response by commentators has been lukewarm. The Town and Country Planning Association said:

The Housing White Paper is a welcome and important first step in reframing the debate on housing in England. It recognises that we need a range of solutions to solve the housing crisis. But in seeking solutions, the White Paper presents a number of conflicts between a vision of planning that is directed solely at the provision of housing units and a vision of planning focused on the creation of communities which meet the complex and long-term needs of people. The result is a mixed picture which is unlikely to have a dramatic impact on either the delivery or the quality of new homes. Some parts of the White Paper risk further reducing the scope for building housing tenures that could help those in greatest housing need, such as social rent.

It seeks to weaken the planning system yet further but alleged failures of the planning system are not a chief cause of the problem. It wishes to see more garden cities but does not will the resources to make them happen. It wants to punish local authorities for failure to deliver when the causes of failure are not always within their power. Having consistently reduced the budgets of local authorities it now wants them to play more of a role when few are equipped to do so. Cuts to local authorities have meant few have the skills or experienced staff to carry out the necessary work.

Land hoarding

A debate has raged for a number of years concerning the alleged hoarding of land by builders. It seems to be a fact that house builders have existing planning permissions for over half a million homes yet these are not being built. The allegation is that this is done for commercial reasons. By rationing the supply of houses it keeps their price high. Holding land, and in particular the scarce resource of land with permission to build, keeps its price high and rising which is to their benefit and enhances their balance sheets. The result is that too few homes arrive on the market.

The builders deny these claims saying that land with permission is expensive to acquire and, undeveloped, sits on their balance sheets not producing a profit. Their business is building homes for profit so why should they not do so? As the process of acquiring and getting permission takes time they need a reasonable stock of land to ensure continuity. Michael Heseltine famously said that ‘countless jobs were tied up in the filing cabinets of the planning machine.’ A modern version might be that ‘countless houses are tied up in the balance sheets of builders.’

Social housing

Once upon a time there were council houses and many readers of this may have lived in one at some point of their lives. Mrs Thatcher introduced the right to buy policy (in fact a proposal by the previous Labour government but never carried out) which saw millions of them become privately owned. The sting in the tail though was that local authorities were not permitted to use the receipts to build more homes. The reason was that owning one’s home meant that people were more likely to vote Conservative.

Housing Associations were introduced to carry out affordable house building and their record has been mixed. The smaller ones have in the main stuck to their remit of building affordable homes. The larger ones are alleged to have become developers first and have lost sight of their original purpose.

The combination of a lack of council housing, astronomical land prices, alleged land hoarding and housing association failure are contributory factors in the housing crisis. These are issues of supply. The other half of the problem is the ability of people to find the funds to purchase i.e. demand. Squeezed incomes over the last ten years of austerity has meant many are excluded from the market. This is despite record low interest rates. One can only speculate what will happen when the current regime of low interest rates comes to an end.

Developers are required to incorporate affordable housing in any development over a certain size. However we find here that there is no parity of arms between developers and a local authority. Developers can afford barristers and expensive surveyors to argue that building affordable homes is unviable and local authorities have neither the expertise nor funds (or political will) to resist them. So fewer of them get built.

Community engagement

A further aspect is the lack of community engagement in the whole process. It has become remote and too complicated for people to either understand or engage with. It has also become top-down with government setting targets for building which local authorities must meet. The effect is that local people have less and less say in what happens in their locality.

With rental properties, many live in homes with little chance that faults will be rectified or repairs carries out. The steady erosion of the planning system combined with cuts to local authorities has meant those in housing stress have no involvement in the housing system. There is also an unholy alliance between local authorities and developers eloquently expressed by Zoe Williams in a recent article:

A culture seems to have become the norm in [a London housing development] in which the council and the contractors saw their interests as completely aligned, their authority as unquestionable and unshakable, and their tenants as either inert beneficiaries or histrionic ingrates. The idea of civic engagement was lost; in its place, a union of faceless bureaucracy and corporate impunity. As the responsibility was passed from a democratic institution to the honeycomb of corporations, much of it simply bled out. (22 July)

The Greffen Tower disaster has already revealed that the residents had little say and were not listened to concerning the risks and dangers they foresaw. The local authority had privatised the management of the properties and tenants had little chance of being heard.

One approach to increasing engagement is through neighbourhood plans which have had an uncertain history. Problems include maintaining involvement in a complex process and the need for procedural scrupulousness in view of challenges to decisions by developers. A simplified system could work however to incorporate community wishes as long as the Nimby factor can be contained.

The Other Side

Thus far we have discussed the problems of housing stress and the effects it has on those struggling to find somewhere to live. The housing crisis is not all one way however because those who are on the ladder have benefitted from the steady increase in house prices. This has provided considerable wealth to the property owning classes, wealth which has nothing to do with effort and is untaxed. From their perspective, rising prices and a dysfunctional market works to their advantage and perhaps some may say long may it continue.

They may experience problems however with their own offspring who struggle to find somewhere to live. Some may be in a position to support their children through the ‘bank of mum and dad’. Others see their children living at home long past when either wish to.

Part of this is a generational problem. Generally, the older generations have done well out of housing as we have said, but it is the younger generations who are struggling. Having acquired this wealth the older generation is reluctant to let it go.

Conclusions

Housing is in crisis and harmfully affects many people in a variety of ways. We view housing as a market or a commodity when some see the need for shelter as a basic right. Market based approaches necessarily distort supply since the purpose of developers is to make a profit. Their role is not social but to maximise returns. Scarcity will work to their advantage by keeping prices high.

Ordinary people have a minimal say in the process as a result of the steady emasculation of planning system, a system designed to build in the wishes of the community into development decisions. Local authorities’ role in development and the provision of housing by them has fallen off a cliff as a result of political decisions. Land and the price it acquires with development potential is a key component yet scarcely gets a mention.

Those on the housing ladder also do well and this may lessen the desire to help those struggling to get on it. Serious political will to tackle the problem is lacking. Politicians are nervous of taking on a wide variety of vested interests, both commercial, media and public. It is true to say that the poorest in society pay a heavy and increasing price for the failure of policy in this area.

It is beginning to form part of the inter-generational debate since those with housing wealth – mainly the older generation – are resisting changes which might benefit those – mainly the younger generation – yet to acquire it.

In future meetings we will be discussing what role Compass might usefully play in the housing debate.